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The four areas are fair value measurement, employee benefit plans, income taxes and
inventory, FASB Vice Chairman James Kroeker said.

The proposals, issued separately and at different dates, stem from FASB’s disclosure
framework initiative. The disclosure framework seeks to improve the effectiveness
of disclosures in the notes to financial statements.

The board decided to test the principles in the disclosure framework to accounting
standards for fair value measurement and pensions because its constituents questioned
whether or not disclosures for those rules were too excessive. Alternately, standards
on income tax and inventories were picked because
of questions from the board’s constituents about whether or not the disclosures were
sufficient.

“Income taxes particularly as it relates to foreign source earnings is an area where
investors rightly say we could use some more information to understand the situation,”
Kroeker said. Similarly, under current inventory rules there are very little disclosure
requirements today, he said.

Overload

FASB started the disclosure framework initiative after feedback from its stakeholders
who said disclosure overload in financial reporting should be expeditiously addressed.
Disclosure overload has generated substantial debate for years.

“I would say almost across the board there’s an increase even in the areas where people
think that there is potentially significant disclosure, or you hear the term disclosure
overload used,”
Kroeker said Sept. 26 at a financial reporting conference. His comments were in response
to a question posed about whether—generally speaking—companies would see more, less
or the same amount of disclosure requirements as a result of FASB’s proposals.

The question was posed by a conference session moderator, Leslie Seidman, executive
director of the center for excellence in financial reporting at Pace University’s
Lubin School of Business during discussions about various disclosure proposals. Seidman
is a former FASB chairman.

Developed By Using Disclosure Framework

Broadly, the disclosure framework is a nonauthoritative internal guide FASB uses.
It defines the purpose of footnote disclosures.

Footnote disclosures are required to illuminate changes in line items on financial
statements. They also provide information about a company and about certain items
that might affect financial line items.

Financial statement users have raised concerns about footnote disclosures because
a single number in footnote disclosures encompasses a great deal of information, but
even so, much of it is insufficient for investors to make useful decisions about future
cash flows.

Four Standards

The board picked four accounting standards on which it would apply the framework:

In July FASB issued the proposal Income Taxes (Topic ASC 740), Disclosure Framework--Changes to Disclosure Requests for Income Taxes;

In January it issued, Compensation--Retirement Benefits--Defined Benefit Plans-General/Subtopic
ASC 715-20: Changes to the Disclosure Requirements for Defined Benefit Plans; and,

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